Arbitration Law in India is governed chiefly by Arbitration & Conciliation Act, 1996 (Act) which is based on the UNCITRAL model and came into force on August 22, 1996. This Act's primary objective is to provide speedy and effective dispute resolution for both International & Domestic commercial arbitration, Conciliation and Enforcement of Foreign Awards in India.

Significantly, filing of an application under section 34 provided automatic stay of Awards by convention till 2015 Amendment came into picture. The Act is an evolving legislation and has gone through major amendments in 2015, 2019 and more recently in 2021 to cater to the demands of the various stake-holders.

Here's a look at the major and notable amendments to the Principal act year-wise with a discussion on their objectives:

Arbitration & Conciliation (Amendment) Act, 2015 [w.e.f. 23.10.2015]

  • The introduction of Section 2 (2) by way of which certain sections such as 9, 27 and 37 would apply to International Commercial Arbitration.
  • Introduction of sub-section 2 in Section 9 prescribes a time limit of 90 days from the date of such order or as court may direct for initiation of Arbitral proceedings where a court institutions to maintain confidentiality of the proceedings and only disclose the Award for the purpose of its implementation. This amendment gave the Arbitration proceedings, the nature of reserved proceedings.
  • Under Section 17, time frame for seeking interim measures by parties was limited till the passing of the award by the Arbitral Tribunal and not beyond.
  • Further, it reduced the scope of interference by the Court under Section 34. It clarified in an explanation of clause 2 that an award will be in conflict with the public policy of India, only if: it was made by fraud or corruption or in violation of Section 75 or Section 81; or it is in contravention with the fundamental policy of Indian Laws or is in conflict with the most basic notions of morality or justice. Additionally, it restricted review of the merits of the dispute to ascertain if there was a contravention of the Fundamental policy of India.
  • Pertinently, Section 36 sub-clause (2) and (3) of the amended Act also provided that in order to get stay on Award, a separate Application for stay needs to be filed and only if the Courts grants an order of stay of the operation, the stay shall be granted. In a nutshell, filing of an Application under Section 34 shall not render the Award unenforceable itself.
  • The Act further involved many other improvements such as Fee modifications of the Arbitrators.

Afterwards, the Arbitration & Conciliation (Amendment) Act, 2019 was passed which introduced Arbitration Council of India (ACI). The Act brought into various amendments to set up a successful hub of Arbitration field in India.

  • One of the Amendment was that in Section 29A, the time period of 12 months for completion of Arbitration proceedings was reckoned from the date of completion of proceedings instead of date of constitution of Arbitral Tribunal.
  • Secondly, Section 34(2) (a) mandated that an Award will be set aside if the party making the Application furnishes proof of its invalidity "on the basis of the record of Arbitration Award" in lieu of just "furnishing proof" of invalidity as provided in the un-amended act. In a nutshell, the requirement of furnishing proof of its invalidity has been replaced with more stringent requirement of establishing on the basis of the record of the Arbitral Tribunal.
  • Surprisingly, the appeals against the Arbitration Award were being filed under the Commercial Courts Act, 2015 before this amendment. To put a restriction to the recourse under the Arbitration act for matters arising under the Commercial Courts Act, 2015, Section 37 was amended and the statement "Notwithstanding anything contained in any other law for the time being in force, an appeal" was added at the beginning of the sub- section (1).
  • Further, the Act introduced the Confidentiality provision as Section 42A and protection of Arbitrators for the actions taken in good faith as Section 42B. A duty was cast on all parties, Arbitrators and Arbitral institutions to maintain confidentiality of the proceedings and only disclose the Award for the purpose of its implementation. This amendment gave the Arbitration proceedings, the nature of reserved proceedings.
  • Also, the Act introduced Eighth Schedule which provided the Qualifications and Experience of Arbitrators as a pre-requisite.
  • Moreover, the Section 87 (b) clarified that 2015 Amendments are applicable only to the Arbitration proceedings and to the Court proceedings arising out of or in relation these Arbitral Proceedings commenced w.e.f 23rd Oct 2015.

Subsequently, Arbitration & Conciliation (Amendment) Ordinance, 2020 (the 2020 Amendment) and successively, Arbitration and Conciliation (Amendment) Act, 2021 came into force.

  • It omitted Eighth Schedule i.e. Qualifications and Experience of Arbitrator.
  • Further, it added a new proviso to Section 36(3). The proviso has retrospective effect w.e.f. 23rd October 2015. The Section 36 pertains to Enforcement. The proviso empowers the Court that on prima facie satisfaction that either the Arbitration Agreement or the making of the award itself was induced or effected by fraud or corruption, the Award shall be unconditionally stayed during the pendency of application under section 34.

Section 36 : Enforcement of Award - A Unique provision

2015 Amendment

The Act in Section 36 after the amendment provides that in order to get stay on Award, a separate Application for stay needs to be filed and only if the Courts grants an order of stay of the operation, the stay shall be granted.

2021 Amendment

By way of 2021 Amendment, the provision added that where the Court is satisfied that a Prima Facie case is made out that the Arbitration Agreement or contract which was the basis of the Award or the making of award was by fraud or corruption, it shall stay the award unconditionally.

In our view, section 36, is a very unique provision. It is titled as "Enforcement", however, from Sub-section 2 onwards, it is laying down procedure attendant to filing application for setting aside of award under section 34.

Interestingly, to make out the case that the Arbitration Agreement or Contract was induced by fraud, an Application for stay along with the Application to set aside an Arbitral Award under Section 34 needs to be filed. However, Section 34 does not contain any provision to file an Application for the purpose of challenging the award if the Arbitration Agreement or contract which is the basis of Arbitral Award was induced or effected by fraud or corruption. In addition to this, the said issue would have already been dealt by the Arbitral Tribunal and it would have passed the Award after considering the same. In that case, the Court cannot re-appreciate the evidence as per the provisions of Section 34.

Therefore, there still exists numerous concerns which needs to be addressed and clarified by the Courts where the provisions of the Act are interpreted with due applications of Justice, equity and good conscience.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.